NIS 400,000 will remain frozen pending resolution of suit against the party by its former treasurer.

The Tel Aviv Labor Court decided Tuesday to keep in place an order freezing NIS
400,000 in Kadima assets pending the resolution of a civil lawsuit against the
party by its former treasurer.

In separate litigation, Kadima had
previously accused its former treasurer, Yitzhak Hadad, of embezzling funds and
he had been arrested and questioned by the police.

On January 16, 2012,
Hadad sued Kadima for NIS 2,590,286 for termination, including breach of
contract and an assortment of other alleged breaches.

Hadad claimed that
he was formally employed by Kadima and entitled to all of the benefits due a
terminated employee in his circumstances.

Kadima said that Hadad was an
independent contractor, who continued to run his own operations on the
side.

The party argued that since there was no employee-employer
relationship, Hadad cannot claim termination benefits only granted to
employees.

Upon filing suit, Hadad requested and obtained a freeze on
certain Kadima party funds being held by a third party pending resolution of his
lawsuit.

The party then filed a request to release the funds, arguing
that otherwise its capacity to campaign during the election would be
harmed.

Kadima went further saying that this harm would constitute a harm
beyond the party, as it would be harm Israeli democracy in limiting Israeli
citizens access to Kadima and its platform.

Hadad was the party’s
treasurer from 2005 until the end of 2011.

Kadima suggested three
alternatives to the current asset freeze, including placing a lien on certain
Kadima property or placing a lien on payables due to Kadima from various other
parties.

Hadad objected to these alternatives, explaining that the
payables are in dispute or may not be paid, that the property was worth much
less than the value Kadima had ascribed to it and that the party had refused to
have the property properly evaluated.

The court found that since Kadima
is about to receive NIS 22 million in public funds, claims that it will be
completely unable to campaign and of the resultant harm to Israeli democracy
were significantly overstated.

The court also agreed with Hadad’s
objections and found that none of Kadima’s alternatives to the asset freeze were
concrete or substantial enough.

However, acknowledging the significance
of the sum being frozen, the court reduced the sum to NIS 400,000.

Kadima
officials responded that the party would receive a much smaller sum in public
funds due to the departure of seven Kadima MKs to the new Tzipi Livni Party.
They noted that Hadad was still being investigated by police and said his claims
should be viewed accordingly.

“The party’s debts of more than NIS 30m.
were accrued at the time that Tzipi Livni led Kadima,” a Kadima spokesman
said.

“Since Shaul Mofaz was elected to lead the party, it has been
cleaned up and it began paying its debts in an orderly fashion.”

Hadad
said he would also sue Livni’s party, because she was in charge of Kadima during
his employment and her party will assume some of Kadima’s debts as part of the
split in the party.

But he said he would wait until after the January 22
election to file the lawsuit.

Hadad added that getting the court to
freeze even part of Kadima’s assets was a significant accomplishment.